The Difference Between A Commercial And Residential Bridge Loan

Bridge loans are a popular choice for real estate property owners who need a quick, safe source of funding.  Depending on which type of property you own, you can get residential bridge loans or a commercial bridge loan.  Lenders such as North Coast Financial offer both types of bridge loans, along with other financial products.  The difference of the two loans has mostly to do with the type of real estate property with which the borrower secures the loan.

You Can Borrow More with Residential Bridge Loans

Bridge loans, like hard money loans, have a limit to the amount of money you can borrow.  The amount you can borrow depends on the value of property you are using as collateral to secure the loan.  When you secure the bridge loan with a residential property, you can borrow up to four fifths of the value of the property.  When you secure the loan with a commercial real estate property, you can only borrow two thirds of its value.  Besides that difference, the two types of bridge loans are very similar.

Other Pros and Cons of Bridge Loans

Bridge loans can make possible a lot of real estate projects, but their requirements are quite strict.  First, you cannot get a bridge loan unless you have real estate to pledge as collateral.  Second, you must pay back the loan very quickly.  The terms of bridge loans range from a few weeks to about three years.  Finally, the amount of money you borrow is always less than the value of the property pledged as collateral.

Residential bridge loans and commercial bridge loans are much more alike than they are different.  The biggest difference is that a residential bridge loan lets you borrow a great percentage of the value of the property.

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